TOPIC: Would like feedback on a business idea

I just finished attending the Asheville Rejects Film Festival. The Rejects Festival was started as a reaction to the "mainstream" Asheville Film Festival. The Rejects maintains a very indie and punk vibe. Virtually all the movies shown at the festival cost under $40,000 to make, and many cost much less. The biggest organization involved was Troma Films, and Lloyd Kauffman, head of Troma Films, won the lifetime achievement award.
Anyway, I was some with some of the other independent filmmakers there (my brother, myself, and friends currently work in television, and are looking to break into movies) about the state of the industry today. The biggest problem for the indie producers, we agreed, is that we are shut out of virtually all theaters, since (for sound financial reasons) most established theaters will only play movies from the major and mid-level studios.
Anyway, here's my idea. Along the Eastern seaboard, there are at least 20 different concentrations of independent filmmakers. Some of these concentrations have around 5-7 producers & studios in them. If they pooled their money and resources into a co-op, they could afford to open and run a theater. Now, one theater wouldn't do 5-7 producers much good. But, if there were 19 other similar theaters in a network....
Each theater in the network would only show films produced by members of the network, and each theater would pledge to screen any film submitted to it by one of the other theaters (at a maximum of two a year) for at least one week, and to the ticket sales 50/50. In return to agreeing to that, each theater could submit films to the network, with a guarantee that at least two per year would get shown for at least one week each.
All of this would give these independent filmmakers what they want most: a foot in the door. Just a chance to recoup some of their investment, and spread awareness of their product.
Does anyone know if something like this has been tried already? Are their obvious flaws I'm missing? Thank you for your time.